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New techniques available for shielding assets from estate tax

New Jersey residents may be interested to learn of two techniques available for shielding certain assets from estate tax. In an online article, a tax expert offered advice about how to use the 2013 American Taxpayer Relief Act to chart a plan for intelligent estate planning. The law has provisions regarding a significantly increased limit for estate tax exclusion and the concept of portability, which may result in significant advantages to families.

Every individual may exclude up to $5.25 million from estate taxes. Also, when one married spouse passes away, the other may take any unused portion of the exclusion amount and apply it to their own estate. This is known as portability. The two provisions may result in significant tax savings for heirs.

In view of the increased exemption amount, only persons considered to be very wealthy will need to be concerned about estate taxes. For those with above-average net-worth, two other avenues are available to potentially help save on estate taxes.

Two types of trusts are designed to be used for transferring wealth to heirs tax-free by removing assets from the estate. One method is the grantor retained annuity trust, or GRAT, and is typically used to shelter investment portfolios consisting of stocks and bonds. The other is a qualified personal residence trust, or QPRT, that is designed for use with future appreciation of real estate.

Estate tax planning for the average person may prove to be a daunting challenge. New Jersey families who may be considering the idea of a will, trust or other estate planning method may benefit from the aid of an attorney. An estate planning attorney may be able to offer suggestions and ideas to help them craft an estate plan that would offer peace of mind and security.

Source: Fox Business, "Shielding Your Assets From Estate Taxes", Judy Martel, July 29, 2013

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